Dollar Strengthens Limitedly, Fed Remains Key Factor
The US dollar has begun to stabilize after slipping in the previous session due to market concerns about political pressure on the Federal Reserve's independence. On Tuesday, the Dollar Index (DXY) hovered around 98.9, indicating the dollar is attempting to recover, although not yet strong enough to completely reverse sentiment.
This dollar strengthening was supported by expectations of a slight increase in US interest rates following several US economic data deemed quite solid. However, the market believes the Fed's politicization has the potential to erode the central bank's credibility in combating inflation—and this poses a structural obstacle to the dollar's near-term strong rally.
From the Fed's perspective, New York Fed President John Williams emphasized that current monetary policy is "well-positioned" to balance labor market stabilization and bring inflation back to its 2% target. His projection for 2026 is that economic growth will remain strong, while inflation is expected to hover in the 2.75%–3.0% range in the first half of this year before tapering off.
Today's main focus remains on US CPI data. Market consensus estimates headline and core inflation will be at 2.7% (YoY), with a monthly increase of around 0.3% (MoM). On the interest rate side, the market also still sees a slim chance of a rate cut in the near term—so a hotter CPI figure could strengthen the dollar, while a cooler CPI could weaken it again. In short: the dollar is trying to recover, but its future direction will largely be determined by the CPI and the issue of the Fed's independence, which remains a major source of "noise." (alg)
Source: Newsmaker.id
